The business sector in Southeast Europe–stimulating activity vs. conforming to EU norms

Abstract

For the present paper, Southeast Europe refers to the following list of states: Albania, Bulgaria, Romania; from the former Yugoslavia: Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia (often referred to as FYR Macedonia, or FYROM; or simply as the Republic of Macedonia), and the federation of Serbia and Montenegro; and Moldova. These states have experienced extremely diverse histories since the fall of communism, including the most severe ethnic conflict seen in Europe since the Second World War, various degrees of economic collapse and recovery, and rather mixed fortunes in terms of building stable and effective states. Given this background, the international community, together with these eight countries, has established a Stability Pact to foster a long-term conflict prevention strategy in the region. Table 1 presents a summary set of recent macroeconomic statistics for each country. Though currently growing rather faster than the CEB countries (Central Europe and the Baltics) that joined the EU in May 2004, the political strife and economic policy failures of the 1990s are clearly visible in the column of Table 1 showing real GDP in 2003 as a percentage of that in 1989. To a significant extent, current high growth might simply reflect recovery from the initial postcommunist economic collapse (and subsequent crises). It is debatable how sustainable it is unless accompanied by large increases in new investment. There is evidently much catching up to be done, with the exception of Albania which bounced back very rapidly from its mid-1990s economic and political crisis. On most of the other economic indicators shown in Table 1, other than the general government balance, the SEE countries are generally in a rather less favourable position than the CEB countries. It is important to bear these very significant differences in performance in mind in the subsequent discussion.